Marriott Bets on Resorts as Industry Eyes Vacation Demand

Marriott International Inc. is expanding its foray into all-inclusive resorts, adding nearly 7,000 rooms in the Caribbean and Central America in a move highlighting how hotel giants are plotting a recovery from the Covid-19 travel bust.

Marriott has struck a deal to add 19 resorts owned by Sunwing Travel Group, including properties in Mexico, Jamaica and Costa Rica, as the world’s largest hotel company bets that vaccination campaigns will unleash a boom in vacation travel.

“This is a transformative transaction that helps us really solidify our position in a segment we think will continue to grow rapidly,” said Tony Capuano, president of the global development, design and operations services group at Marriott. “There is enormous pent-up demand for those destinations.”

Marriott shares slipped 1.6% to $127.01 on Tuesday in New York.

Toronto-based Sunwing will continue to own the properties, including the 566-room Planet Hollywood Beach Resort Cancun and the Royalton Punta Cana Resort & Casino in the Dominican Republic. The hotels will convert to Marriott’s Autograph Collection, a so-called soft brand that lets independent hotels access corporate loyalty programs and reservation systems. The deal more than doubles Marriott’s all-inclusive portfolio, according to a statement Tuesday.

Caribbean hotels were hit hard by the pandemic, with occupancy rates falling to 30% in 2020, down from 64% in the year before, according to lodging data provider STR. But proximity to U.S. vacationers bodes well for the region, especially compared to properties that will rely on corporate travel to spur recovery.

Long term, the hotel industry needs business travelers to get back on the road. But for now, pent-up demand for leisure travel is the best bet to drive a lodging rebound, according to a research note from Michael Bellisario, an analyst Robert W Baird & Co.

Marriott is navigating its pandemic recovery without its longtime leader, Chief Executive Officer Arne Sorenson. The company said recently that Sorenson, who has led the company since 2012, would reduce his work schedule to undergo demanding treatment for pancreatic cancer. Capuano is one of two executives who are handling the company’s day-to-day operations.

For Marriott, the deal with Sunwing marks the next step in a foray that began before Covid-19 rattled the global hospitality industry. The company splashed into all-inclusive resorts in the summer of 2019, announcing plans for two new resort properties, including a Ritz-Carlton on Mexico’s Riviera Nayarit.

Those deals represented a milestone for Marriott and the business model. For decades, all-inclusive resorts had been the domain of specialty operators, which offered budget-minded travelers lodging, meals and other items for a single price.

As the concept gained popularity with vacationers, the world’s largest hotel companies determined that loyalty members who accrue points on business trips would like to spend them at all-inclusive resorts.

The model is especially appealing to hotel companies now, when demand for leisure travel is outstripping bookings by corporate road warriors and conference-goers.

“The pandemic has been a historic challenge to the travel industry, and we’re finally seeing a light at end of tunnel,” said Capuano. “We want to be prepared to take full advantage when demand comes roaring back.”

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